Up to $1.6 billion could be stripped from the federal government’s budgeted $13.4 billion minerals resources rent tax take over the next four years by the Queensland government’s increase in coal royalty rates.

Despite earlier threats to penalise states dollar-for-dollar for any increases to royalties, Treasurer
Wayne Swan
yesterday refused to disclose his next move.

Companies can offset royalty payments against their MRRT liability, but Queensland Resources Council chief executive Michael Roche said the higher royalties would impose an extra cost on companies as they would pay little or no MRRT.

“The MRRT is paid when there’s super profits," he said.

AFR
AFR

“Companies will be lucky if they make a profit at the moment, let alone a super profit. So no one pays MRRT but they will all be hit by this royalty increase."

In the Queensland budget,
Campbell Newman
’s Liberal National government increased the 10 per cent royalty on coal valued at more than $100 per tonne, to 12.5 per cent on coal worth between $100 and $150 per tonne. Above $150, the royalty rate will rise to 15 per cent.

The increase, which applies from October 1, will add $1.6 billion to the state’s coffers over the next four years.

Mr Swan wrote to premiers last month to warn that penalties – including lower goods and services tax revenue and cuts to infrastructure funding – would apply to states that increased royalties.

Related Quotes

Company Profile

The federal government’s GST distribution review panel warned in June that the MRRT was “ultimately unsustainable", as it gave states an incentive to rachet up royalties on iron ore and coal.

Greens leader
Christine Milne
said her party would introduce a bill today to cap royalty offsets against the MRRT at July 2011 levels.

“This loophole and the gouging by state premiers that it will encourage puts at risk the government’s ability to care for people and prepare Australia for the challenges of this century," she said.

Last year, the West Australian government blew a $2 billion hole in mining tax revenue when it increased iron ore fines royalties. NSW has threatened to increase its coal royalties.

Association of Mining and Exploration Companies regional manager for Queensland Bernie Hogan said that while the change made Queensland a “higher royalty state", he did not want Mr Swan to enter the fray.

“We would hope it doesn’t come to a situation where Queensland as a whole is punished because the federal government want to have another agenda," he said.The Newman government has pledged that it will not increase coal royalties for another ten years.

A spokesman for the Minerals Council of Australia said he feared that a budget-driven federal government would cut the diesel fuel rebate, potentially adding “up to 7 per cent to the existing cost structures on mines" and having a “very debilitating effect on many operations".